There are several different types of Bitcoin clients. Header-only clients like MultiBit trust that the majority of mining power is honest for the purposes of enforcing network rules such as the 21 million BTC limit. Full clients do not trust miners in this way.

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Hmm. Interesting. Perhaps I should cancel my sell order and just hold on to my BTC for the time being.

I don't know. I have done some more testing and right now it looks like it could be this way for a while. I have been holding, but now I am thinking that it could actually be more productive to join the bots and systematically take advantage of the small daily fluctuations.

It does, although it may not be the way you wish. As long as it is profitable to mine the difficulty will continue to increase, even if the price is falling.

Yeah, that's what we'd call "price moves in the opposite direction of difficulty". I really don't think price has that much to do with difficulty and vice versa. The exchange market seems to have a mind of it's own, regardless of what the difficulty is.

With 7200 new coins generated every day with a matching trade volume, we can only hope miners are patient. While prices rising, miners would be right to hold, but their confidence is heavily tested on the way down. Casual day traders are afraid of the market and recent chaos is hardly attractive to first time buyers. It's up to extant holders to buy more at these bargain prices.

It appears that a contingent of traders has decided that $/BTC should track the DJI or some indicator very similar to DJI. For instance, this is something that could be driving a bot trading strategy, and such a bot will have to periodically re-balance in order to continue with the strategy without going illiquid.

Based on this observation I would expect $/BTC to seek an equilibrium approaching a scaled multiple of DJI. To arrive at that multiple I would use price averages from about June 16, 2011 to present, as this seems to be the point at which $/BTC started tracking pretty closely with the DJI. But I am pretty certain that this strategy has a shelf-life, as attempting to hold a peg like that is ultimately unsustainable.

You don't know what you are talking about, there is no correlation between DJI and Bitcoins, you are just seeing what you want to see.

It appears that a contingent of traders has decided that $/BTC should track the DJI or some indicator very similar to DJI. For instance, this is something that could be driving a bot trading strategy, and such a bot will have to periodically re-balance in order to continue with the strategy without going illiquid.

Based on this observation I would expect $/BTC to seek an equilibrium approaching a scaled multiple of DJI. To arrive at that multiple I would use price averages from about June 16, 2011 to present, as this seems to be the point at which $/BTC started tracking pretty closely with the DJI. But I am pretty certain that this strategy has a shelf-life, as attempting to hold a peg like that is ultimately unsustainable.

You don't know what you are talking about, there is no correlation between DJI and Bitcoins, you are just seeing what you want to see.

True, there is no natural correlation.

It is completely the result of the systematic strategy of a trading contingent that has been in effect since about June 16, 2011. The data doesn't lie...

The data doesn't lie because you will always find correlation between what ever you want to find a correlation for, for a shorter period of time. Once again you will not find a clear correlation between bitcoins and DJI for longer period of time, that we in finance call, a "real" correlation. Don't even bother following it. Bitcoins have a fundamental ground that have other parameters that you should look for. One clear correlation is cost of mining and price, start looking there.